Hope for 5-way trade depends on US priorities

By Brian Fallow

WELLINGTON - "We'll get back to you on that" was the message from United States President Bill Clinton when Prime Minister Jenny Shipley raised the question of a five-way free trade agreement linking New Zealand, Australia, Singapore, Chile and the US.

"It is a very interesting idea," Mr Clinton said after his meeting with Mrs Shipley.

"I have asked the Prime Minister to give me 10 to 14 days to go home, talk to all of our people about it, have a chance to think it through."

The idea of a "P5" agreement, as it is known, gained new momentum during the Apec meeting with the announcement first of plans to conclude a free trade agreement between New Zealand and Singapore and then of a study of the case for Chile's joining it.

Mr Clinton's comments, while positive, were non-committal. The concern is that as he returns to the US, the manifold claims on his attention and the difficulties facing any free-trade proposal in the US will see the P5 project rapidly pushed to the back of the stove.

For one thing, Mr Clinton does not have fast-track negotiating authority from the Congress, which would allow his administration to conclude a trade deal without the risk that US lawmakers would relitigate it.

Paradoxically that is also being seen as a reason the US Government might want to progress a deal like P5 - to demonstrate that its trade policy is not hobbled by the lack of fast-track authority and so deprive the European Union of that excuse for dragging its feet.

Another incentive the US might have to conclude a Pacific free trade agreement is as an exemplar or template for how to deal with the vexed issues of labour and environmental standards, which are less of an issue among the P5 economies.

"We are talking about a state-of-the-art free trade agreement," Trade Minister Lockwood Smith said yesterday. "To make it that we would probably have to deal with labour and environment issues. We don't want to reinforce the notion that more liberal trade means [exploitation]. Mr Clinton has spoken of establishing the concept of trade with a human face. Here's a chance to do it."

A P5 free trade agreement would have to get past a US Congress attuned to the political reality that, as US Commerce Secretary William Daley put it at the chief executives' summit, when it comes to trade Americans think of lay-offs, not pay-offs.

And nowhere is US public opinion more protectionist than in the dairy industry - where the biggest gains from free trade agreement with the US would lie for New Zealand.

For Dr Smith a key feature of free trade agreements like that in train with Singapore is that they are not exclusive; others may join.

The goals Apec has set itself of free trade and investment by 2010 for developed economies and 2020 for developing ones are challenging, Dr Smith said, and need to be approached using a range of strategies. Apec members' individual action plans of voluntary liberalisation moves are one mechanism, free trade agreements are another.

"Apec has shown that far from heading back to protectionism, there is a determination to move towards greater liberalisation."